After the Titanium crash: will there now be stricter regulation of stablecoins?

For a long time, stablecoins were considered by crypto investors to hedge against volatility. However, after the Titanium course recently collapsed and also carried the IRON with it, calls for a regulation of the supposedly secure Internet coins are loud.

• Titanium crash takes IRON course with it
• Tether because of false statements in the sights of the authorities
• Demands for stronger regulation

Stablecoins as a hedge against price falls

Anyone who invests in crypto currencies usually has to expect strong price fluctuations. Above all, the crypto veteran Bitcoin has recently been characterised by high volatility and fell within three months from its record high of more than 64,000 US dollars in April to below 30,000 US dollars this month. In the meantime, the largest crypto currency in terms of market share has leveled off again above the 36,000 mark. Stablecoins, on the other hand, aim to achieve less volatility. These are also internet currencies, the price of which is linked to a national currency or a currency basket. Tether , for example, is traded one-to-one against the US dollar .

Titanium crash takes stablecoin with it

The latest developments in the crypto currency Titanium have shown that an investment in stablecoins does not protect investors from losses. The relatively small cyber currency recently crashed from more than 60 to almost zero US dollars . – Trade Bitcoin with Plus 500 – this is how it works. 72% of retail investor accounts lose money when trading CFDs with this provider. You should carefully consider whether you can afford the high risk of losing your money. – Titanium is not a stablecoin, but IRON is. IRON has invested part of its collateral in titanium, which is why prices fell here as well. “We experienced the first bank run in crypto history,” commented the developers of the stablecoin on the latest events on their website.

Tether in the crossfire of the authorities

“In 2017 the stablecoins were still small. But today they are an important part of the crypto ecosystem,” Deutsche Welle quotes the blockchain expert Joseph Edwards. With a market capitalization of US $ 64.5 billion, Tether ranks third among the largest cryptocurrencies (as of June 28, 2021). For a long time, the developers said that every US dollar invested would also be covered with their own cash, the international broadcaster continued. However, this was not the case, as has now turned out. The developers had to pay a million dollar fine for false statements, as a result of which the attorney general banned trading with Tether in New York. Now the makers behind the stablecoin are also obliged to Deutsche Welle reports quarterly on their systems. In addition, the company behind the coin reserves the right to delay withdrawals of the currency if there is a lack of liquidity or the reserves have been used up. “Tether makes no guarantees as to whether Tether Coins that can be traded on the website can be traded on the website at any time in the future,” explains crypto journalist Amy Castor, according to the network.

False Credibility?

Criticism of the supposedly stable crypto currencies also came recently from the Bank for International Settlements (BIS). “Stablecoins try to import credibility by being backed by real currencies,” said the organization’s annual report. “As such, they are only as good as the leadership behind the promise of protection. They also have the potential to fragment the liquidity of the monetary system and undermine the role of money as a coordination tool. In any case, stablecoins are to that extent , in which the alleged security concerns conventional money, ultimately only an appendage of the conventional monetary system and not a game changer. ” Ultimately, the institute summarizes that cryptocurrencies – and thus also stablecoins – in an environment

Observation should increase

And the President of the Boston Federal Reserve Bank, Eric Rosengren, also considers it necessary to observe the increasing use of stablecoins, as this could minimize the risks of a financial crisis in the further course, as the news agency Reuters writes. Otherwise the recovery of the labor market is threatened and there could be a further economic downturn. “The reason I talked about tether and stablecoins is because if you look at their portfolio, it basically looks like a top-tier money market fund portfolio, but maybe riskier,” PYMNTS.com quoted the chairman as saying. “I worry that the stablecoin market, which is currently quite unregulated as it grows and becomes an important sector of the economy that we must take seriously,

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Digital central bank currency as a solution?

Above all, the events around Tether could be groundbreaking for further handling of stablecoins, believes crypto expert Philipp Sandner. Although investors currently still trust the cyber motto, so that one cannot speak of a second Wirecard scandal, as the industry expert reveals in an interview with Deutsche Welle, the focus of the authorities on Tether and the like will increase in the future. And analysts could also take a more critical look at stablecoins. If Tether really wanted to hide a scam, trust in the sector would suffer enormously, said Sandner.
The introduction of state cryptocurrencies could help, as the Neue Zürcher Zeitung writes. While some countries are already preparing a digital central bank currency, a corresponding variant of the yuan is already in the starting blocks – which is why the People’s Republic is putting crypto giants such as Bitcoin under considerable pressure. For now, however, it remains to be seen who will be ahead of the game in the end: common crypto currencies, stablecoins or digital central bank currencies.